The days of Warner Bros. Discovery cutting content for tax purposes are over, according to CFO Gunnar Wiedenfels.
Following a series of brutal axings in 2022, including shutting down big-budget tentpole Batgirl, killing J.J. Abrams’ HBO drama Demimonde, culling TBS series such as The Big D, Chad and Kill The Orange Bear as well as a raft of cancelations including Westworld, Wiedenfels said, “We’re done with that chapter”.
Speaking at a Citibank media conference, the exec also took the opportunity to once again chastise the entire industry for its spendthrift ways. Asked by moderator and veteran Citi analyst Jason Bazinet about where the company lies on the spectrum of direct-to-consumer and wholesale content production for others to distribute, Wiedenfels replied, “The truth is in the middle.” He invoked CEO David Zaslav’s declaration, during the humbling of Netflix in early 2022 as Wall Street recalibrated its standards for the streaming business, that WBD was “not out to win the spending wars” in the sector.
As executives sought to steam out costs from the operation, Wiedenfels said that it “took a little bit of time to make sure that we do it properly,” which is why the process took six to seven months to unfold.
“That was very important to all of us to really use 2022 to leave the purchase accounting behind us leave those initial strategy changes behind us get it all, get it all out there in terms of our restructuring estimates, and then be able to turn the page and move forward,” he added.
WBD has gotten “a lot of public noise about the content writeoffs that we took,” the exec continued. That is “a reflection of an industry that went overboard and went on a spending frenzy. There was a lot of thinking of, ‘let’s do more, more, more,’ not necessarily ‘let’s do the exact right things, let’s do what works.’”
The company has projected it will achieve $3.5 billion in cost savings as a result of the merger. Members of a retooled management team, albeit with a few carryovers from the era when AT&T owned WarnerMedia, “are all going in,” Wiedenfels said. “They’re taking stock. It’s a new day. They’re looking at what works, what doesn’t work.”
Declines in WBD’s stock price in recent months have reflected widespread uncertainty about the merger. They slipped below $9 by the latter part of last year, from almost $25 when the deal closed last April, though this week has brought more encouraging news as 2023 begins. The stock was up about 6% today to around $11 in mid-day trading.
As far as any further cost savings opportunities now that the content writeoffs are complete, Wiedenfels reiterated Zaslav’s previous assertions that no “strategic asset sales” are in store. “Beyond that, there is opportunity” for more trims, he said. “There’s a real estate portfolio where there may be better structures for us to generate liquidity. We’re in the process of analyzing those less-visible, non-core parts of the portfolio.”
While the company is carrying a significant debt load of about $50 billion, Wiedenfeld said he is “pleased” with the company’s capital structure. No debt repayments are looming and the interest rates are favorable, he said.
